Ok, I’m running a little late… according to my weekly outlook, I should have posted this last week! Opps. Life is a balancing act and sometimes you have to drop one ball. Luckily, I have some time this weekend to pick that ball up and throw it onto the blog. I finally get to share about this constant bug in my head… student loans. I’ve been wanting to write about this for months since I graduated with my Masters in December, and it affects our family finances, plus it’s a big topic of concern for the young college generation today.
Like many other post-grads in this country, I am strapped with tons of student loan debt. This year, the average student graduates with $25,250 of student loan debt and private student loans average around 9% for interest rates. Based on these average numbers, students would be looking at a monthly payment of about $319.86. And to top that, if you went for a higher degree in graduate school, you’ll have around $43,524 in debt when you’re done (that’s me). AND I heard on the radio yesterday that the nation’s student loan debt is 1 trillion dollars. That’s more than all this country’s credit card debt, combined! Which irks me because all driven and motivated young professionals of tomorrow are paying bills just as big as the shopaholics out there maxing out there cards on frivolous materialistic items.
Luckily, there is a light at the end of the tunnel… and a reason to all this madness of getting into tons of debt. A higher degree means more earning potential. A Bachelor’s degree position pays $26K/yr more than a high school diploma position. A Masters? $15K more than that. (source) So, it’ll all be worth it in the end, right? Well, when we get to the end… whenever that will be. I feel like I keep chipping away and with interest, it doesn’t seem to make a dent.
However, I’ve been doing this (paying off my loans) for 3-1/2 years now, so I’ve learned a thing or two. I keep chipping away, and when I can, throw money at a loan and eventually pay it off..which feels AMAZING! Here’s a few tips/tricks I’ve learned along the way…
- Consolidate. Six months after you graduate, your student loans will kick in. The best way to address the many loans you’ve accumulated over the semesters of school is to first consolidate them. This gives you one payment, and one place to pay them. That way you don’t forget about one and it allows you to easily prepare for one monthly payment.
- Automate & forget them. By setting up an automatic payment with your bank, or thru their online servicing (Sallie Mae has this feature), you ensure the payments are made on time. You never forget a payment which means no late fees!
- Lower Your Interest Rates. Most loan companies knock off a percentage of your interest rate for setting up automatic debit or going paperless. Check out what savings options are offered to you.
- Pay off Higher Interest Loans First. Now that you know how much you’ll be paying every month, throw a little extra $$ to the higher interest loans, so in the long run, you’ll pay less interest on them. I recently had one loan down to $500 and paid it off. Had I kept making the minimum payments on it, years later when I would have paid it off, I would have paid $720.
- Claim Interest on your taxes. Don’t forget to claim the interest you’ve paid on your loans on your taxes!
- It’s Good Debt. Remember although student loans can be daunting and you feel like they’ll never get paid off, they are good debt. If you keep paying them off on time, your credit builds. But remember that it will affect other purchases. When we bought our house we had to supply all the info on our student loan debt, which affected how much of a mortgage we could afford.